China's four State-owned asset management companies (AMCs) are expected to be granted licences to set up securities firms soon.

 

Dai Biao, a spokesman for the China Securities Regulatory Commission (CSRC), confirmed that the State Council had already approved the AMCs entering the securities industry.

 

"As the cabinet has given the go-ahead, the CSRC is considering granting AMCs licences within the week," an insider with the CSRC told China Da ily.

 

Three of the four AMCs China Huarong, China Cinda and China Orient will be the first batch to establish securities firms, leaving the fourth, China Great Wall, behind.

 

"By acquiring the licences, AMCs will be capable of holding their own securities firms either by taking over or by restructuring domestic securities companies," said Liao Liang, assistant to Zhao Xiaosong, vice-president of China Great Wall.

 

Currently the AMCs except China Great Wall have been entrusted by the CSRC as caretakers of some poor performing brokers, paving the way for them to engage in further takeovers or restructuring.

 

China Cinda is expected to be the first AMC to set up a securities firm, Cinda Securities. Li Xuemei, spokesman for the company, said it was busy setting up the new firm, which is likely to be launched next June.

 

The securities company will be established on the basis of two badly performing brokerages, Shenzhen-based Han Tang Securities and Liaoning Securities, in China's north.

 

It will own 60 operating branches and 1.5 billion yuan (US$187.5 million) in working capital, China Securities News said yesterday.

 

China Huarong will also set up a securities firm by restructuring D'Hong Securities and Hengxin Securities. China Orient will take over Fujian-based Minfa Securities.

 

"China Great Wall has not been entrusted by the CSRC to take care of any poor performing brokers up till now," Liao said, explaining why the company is falling behind the other three AMCs. But he added that it is actively seeking appropriate securities firms to trigger off a move.

 

The four AMCs will be restructured into joint-stock commercial ventures once bad loan clearing tasks are completed at the end of this year.

 

"AMCs are not likely to completely turn to investment banks in the future, but will become financial companies dealing in comprehensive business," Liao said, clarifying earlier local media reports claiming the AMCs will become investment banks in the future.

 

As newcomers to the brokerage business, the AMC-held securities firms will hold no advantage competing in traditional activities such as underwriting initial public offerings; instead, they are likely to be stronger in mergers and acquisitions given the rich source of clients.

 

The Ministry of Finance, currently the sole owner of the four AMCs, has been soliciting feedback from the firms about a draft reform plan requiring the AMCs to undergo joint-stock restructuring and take on strategic investors from both home and abroad.

 

(China Daily June 28, 2006)